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TMI Blog2019 (3) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings as supported by confirmation of accounts filed by the assessee in respect of concerned sundry debtor. Last but not the least, the alleged discrepancy, viewed from any angle, would have no bearing on assessee’ income during impugned AY and therefore, there could be no occasion to term the assessment order as prejudicial to the interest of the revenue on this account. This being the case, the twin conditions as envisaged by Section 263 viz. the orders should be erroneous as well as prejudicial to the interest of the revenue, remained unfulfilled on this issue Sale of investment - HELD THAT:- Upon careful consideration of financial statements, it is undisputed fact that the shares held by the assessee, has all along, been reflected under the head investments rather than as stock-in-trade which is further fortified by the fact that the investments are valued at cost as against stock-in-trade which is generally valued at lower of cost or market price. It is settled legal position that it is possible for the assessee to maintain two portfolios i.e. an investment portfolio held as capital asset giving rise to income / loss under the head capital gains and trading portfolio hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. ARs For The Revenue : Shri Suhas Kulkarni, Ld. DR ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year [AY] 2008- 09 contest the invocation of revisional jurisdiction u/s 263 by Ld. Commissioner of Income-Tax-5 [CIT], Mumbai on 26/03/2013. Although the assessee has raised as many as 10 grounds of appeal, the effective main ground of appeal is ground number-3 whereas the other grounds are in support of the main ground. Ground Number-3 reads as under: - The assumption of jurisdiction under Section 263 of the Act by CIT is beyond the scope of provisions contained in Section 263 of the Act. Therefore, the order is not sustainable in law and liable to be quashed. 2.1 Facts germane to the issue are that the assessee being resident corporate entity stated to be an investment company engaged in investment in shares and debentures of unlisted companies was assessed for impugned AY in scrutiny assessment u/s 143(3) on 24/12/2010 accepting returned loss of ₹ 552.34 Lacs reflected by the assessee in its return of income e-filed on 20/09/2008. The said loss comprised-off of Busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that there was only a typographical error in mentioning the amount of opening balance which was shown as negative instead of a positive amount. The assessee further submitted that investments were held as capital investments and not as stock-in-trade and therefore, resultant profits / gains were rightly assessable under the head Capital Gains as done by Ld. AO and consequentially, the provisions of Section 44AB were not applicable to the facts of the case. However, rejecting the same, Ld. CIT upheld the revisional jurisdiction and directed the Ld. AO to reframe the assessment as under: - 5. In the light of the above facts, the assessment order passed is hereby cancelled u/s 263 of the Act. The A.O. is directed to pass the assessment order de novo after according adequate opportunity of hearing to the assessee. Aggrieved by aforesaid directions, the assessee is in further appeal before us. 3.1 The Ld. Authorized Representative for Assessee [AR], Shri Vijay Mehta , drawing our attention to the financial statements as well as other documents as placed in the paper-book, vehemently contested the above stated observations made by Ld. CIT on which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... la Vs CIT ITAT, Mumbai ITA No. 2378/Mum/2015 06/01/2016 3.2 Per Contra, Ld. Departmental Representative [DR] submitted that non-consideration of certain vital aspects, as noted by Ld. CIT, while framing the assessment made the order erroneous as well as prejudicial to the interest of the revenue and therefore, the jurisdiction was rightly invoked which was the only recourse available to revenue under the circumstances. 4.1 We have carefully heard the rival contentions and perused relevant material on record including impugned order, Assessment framed by Ld. AO, documents placed in the paper book, financial statement, Memorandum Articles of Association of the Assessee company and judicial pronouncements as relied upon by respective representatives before us. 4.2 Upon perusal of impugned order, it is noted that the assessment order has been held to be erroneous prejudicial to the interest of the revenue mainly on four grounds, each of which has been dealt with by us in the succeeding paragraphs. 4.3 The first ground which has led the Ld. CIT to form the aforesaid belief is the fact that there was a difference of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l jurisdiction u/s 263. 4.5 The second observation made by Ld. CIT stem from the fact that closing value of a sundry debtor namely Essar Investments Ltd. , as per Ld. CIT should have been Rs. (-)9,26,30,150/- as against ₹ 48,71,950/- reflected by the assessee in the books of accounts, as computed in the following manner: - No. Particulars Amt. (Rs.) 1. Opening Debtors - 4,87,51,050/- 2. Additions during the year 16,19,42,600/- 3. Deletion / Reduction during the year -20,58,21,700/- 4. Closing Debtors - 9,26,30,150/- This discrepancy arises in view of the fact that the opening value of sundry debtors , in fact, was a positive value instead of a negative value and the same was merely a Typographical Error which crept in assessee s submissions filed during assessment proceedings to Ld. AO. The detail of the same has been placed on page no. 21 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e CIT, is not erroneous and prejudicial to the interest of the revenue. We are of the considered view that the very purpose of affording of an opportunity of being heard to the assessee, on the issues on which the order passed by the A.O is sought to be revised by the CIT would be lost and rendered otiose, in case the reply of the assessee explaining as to why the order sought to be revised is not erroneous and prejudicial to the interest of the revenue is not judicially deliberated upon by the CIT. We are of the considered view that it is obligatory on the part of the CIT to consider the reply of the assessee in respect of the issues on which the order of the A.O is sought to be revised by him. It is only if the conviction of the CIT that the order of the A.O is erroneous and prejudicial to the interest of the revenue outweighs the reply/explanation furnished by the assessee, that the CIT remains vested with the jurisdiction to proceed with and revise the order of the A.O. We though are not oblivious of the fact that the view that an order passed by the A.O is found to be erroneous and prejudicial to the interest of the revenue remains within the exclusive realm of the wisdom of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record irrebutable material which inescapably established that the order of the A.O was not erroneous and prejudicial to the interest of the revenue in respect of certain issues on which the same was sought to be revised, however, the same did never see the light of the day and except for forming part of the record and finding a mention in the order passed by the CIT u/s 263, were however as a matter of fact never deliberated upon and brought to a logical end by the CIT. We are of the considered view that in the backdrop of the explanation/objections filed by the assessee during the course of revisional proceedings in respect of certain issues on which the CIT had sought to revise the order passed by the A.O under Sec. 143(3), the CIT had failed to point out as to how the order of the A.O was found to be erroneous . We are of the considered view that in the absence of clear observations of the CIT as to how the order of the A.O after considering the explanation/objections filed by the assessee was found to be erroneous in respect of the said respective issues, thus, can safely be held to have failed the fundamental requirement for valid assumption of jurisdiction as per the mandat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his responsibility of examining and investigating the case. More so, in view of the fact that the assessee explained that the capital investment made by the partners, which had been called into question by the CIT was duly reflected in the respective assessments of the partners who were income-tax assessees and the unsecured loan taken from M/s Stutee Chit Finance (P) Ltd. was duly reflected in the assessment order of the said chit fund which was also an assessee. We find that a similar view was also arrived at by the Hon'ble High Court of Punjab Haryanain the case of CIT v. R.K. Metal Works [1978] 112 ITR 445, wherein stressing on the statutory obligation on the part of the CIT to deal with the points raised by the assessee in its explanation/objection filed with him during the course of the revisional proceedings to show that the order passed by the A.O was not erroneous and prejudicial to the interest of the revenue, in context of the issues on which it was sought to be revised, the Hon'ble High Court held as under:- There is no indication in the order of the CIT as to the basis on which he came to the prima facie conclusion that the capital borrowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had all along been making investments in shares and income derived therefrom has regularly been assessed under the head capital gains as evident from assessment orders of various other assessment years as placed on record and therefore, following rule of consistency, the revenue was debarred from changing his stand on this point particularly when there was no change in material facts. It has further been submitted that the assessee has consistently shown its intentions to hold the shares as investments only and not as stockin- trade which is evident from the financial statements and borne out of the fact that the assessee carried out only two sales transactions of shares during the impugned AY. Further, the assessee s claim, on merits, was duly examined as well as verified by Ld. AO during assessment proceedings and the resultant gains / losses were accepted under the head capital gains with due application of mind. Since, the action of Ld. AO was one of the possible views, the order under question could not be said to be erroneous, in any manner. 4.7 We have duly considered the submissions on this point. Upon careful consideration of financial statements, it is und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee claim was accepted with due application of mind and the action of Ld. AO in accepting the income under the head capital gains was certainly one of the possible views which could not be said to be perverse or contrary to law, in any manner. Simply because the resultant income, in the opinion of Ld. CIT, should have been assessed as business income, would not make the assessment order erroneous unless the same is not in accordance with law. We find substantial force in the arguments raised by Ld. AR, in this regard and concur with the submissions made before us. For the same, we draw strength from the following observations of Hon ble Apex Court rendered in the case of CIT Vs. Amitabh Bachchan [384 ITR 200]: - 21. There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a cours ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A 2750-56/Mum/2016 29/06/2016 5. Surya Alloy Industries Ltd. Vs CIT ITAT, Kolkata ITA No. 769/Kol/2013 04/03/2015 6. Rashtriya Chemicals Fertilizers Ltd. Vs CIT ITAT, Mumbai ITA No. 3265/Mum/2017 14/02/2018 The Ld. DR has controverted the same by submitting that computation of capital gains formed entire gamut of the assessment and therefore, the directions were perfectly valid. 5.2 After weighing the rival submissions including assessment order, we find certain force in the argument raised by Ld. AR in view of the fact that under law, Ld. AO is not permitted to review the orders. The cancellation of entire assessment order and direction for reframing of assessment de novo would empower Ld. AO to review the already concluded issues which is not the intention of the legislatures. For this, we draw strength from the following observations made by Hon ble Delhi High Court in the case of ACIT Vs. J.K.D Costa [133 ITR 7] as confirmed by Hon ble Apex Court : - 7. The second question, in our opinion, is also capable o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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